E-Procurement

Home Glossary E-Procurement

What is E-Procurement?

Electronic procurement is services and information in business to business (B2B), business to consumer (B2C), or Business to Government environment via the internet or other networking systems like Data exchange via Enterprise resource planning (ERP). It is also known as supplier exchange is a sale or purchase of goods.

The E-procurement value chain consists of e-tendering, e-informing, e-auctioning, vendor management, catalogue management, contract management, e-invoicing, inventory management, e-payment, order management, and others. These elements form the value chain are optional and used as per the unique business process requirements.

Implementation of E-Procurement results in a cost-effective, transparent, and data-driven approach to reach the best supplier of goods or services.

Why E-Procurement?

E-procurement is effective by reducing time, expenses, and providing coherent real-time information during the procurement process. The implementation has changed the way procurement worked in earlier times; it has automated the complex task of finding the best procurement deal. Its working and benefits are explained in-depth below.

How does E-Procurement Work?

The E-procurement process follows a standard set of steps, such as:

Identifying the requirement: Business evaluates the requirement of goods or services. Businesses try to recognize the kind of product they are looking for, along with estimated quantities.
Look for suppliers: Varies suppliers of that product are evaluated. The evaluation can be based on after-sale services; public forum ratings estimated delivery time and various other parameters stored in the E-procurement system.
Finalizing a supplier: The supplier is finalized for procurement after running all validations and checks. To reach the final supplier, multiple steps like Request for information (RFI), Request for quotation (RFQ), comparison reports, and Historical data analysis are obtained via the E-procurement system.
Purchase requisition and order: Once a supplier is selected the purchase requisition and orders are raised. The delivery date estimates are received along with living status. The inventory is updated once goods are received. E-invoicing and E-payments modules are run to settle financial accounts between two businesses.
Measure supplier performance: Delivery can be one at a time (One-time order) or over a period of time (Contracts). Order and contract management modules are used to streamline the process. The delivery lag days, quality, quantity, packaging quality, and other aspects of supplier services are managed.
Analytics: Stored data can be used to derive insightful information to fine-tune strategic business decisions.

The process and the stages involved from the value chain may vary depending upon the frequency of material bought, product quantity, service hours, customization involved in the product making, and other business-specific product requirements.

What are the Benefits Associated with E-Procurement?

Automates manual work: It eliminates paper-work and several manual hours wasted to keep track of the process. E-procurement system automates the process saving many manual hours spent on trivial tasks. This reduces the communication gap between the different stakeholders involved.
Real-time information exchange: The vendor master information, transactional data, Pricing data, all of it can be updated and stored at one place leveraged by multiple stakeholders encourages better information exchange rather than people connecting one to one.
Informed decision making: The single source of truth (E-procurement system here) stores data for a longer period which plays a vital role by providing insightful analysis about procurement. Well informed decisions making culture can lead businesses to crack strategic deals, raise profit margins, and reduce wastages.
Cost-effective: E-procurement system is a very cost-effective solution to the process involving a lot of manual work hours, paper-work, information exchange, and much more. This all can be automated and stored to maximize the gain.
Improved transparency: Various governmental agencies, PSUs, NGOs, and public societies can make use of E-procurement as a transparent tool with all activities recorded and properly channelized.